Worldwide Developer Conference in June. Promising better recommendations through its "For You" section, a better way for artists to reach fans with "Connect" coupled with an expansive catalogue of 30 million songs, Apple Music appeared poised to dominate the streaming music world. After all, when was the last time Cupertino had failed? Online tech blogs erupted on all sides, trumpeting the inevitable demise of Spotify to make way for the new streaming king. Daniel Ek, the CEO of Spotify, was unfazed. He deleted his two-word tweet, "Oh OK" shortly thereafter.
It now appears that Ek was onto something. The initial hype surrounding Apple Music has failed to materialize. The streaming landscape, into which Apple was a late entrant, is saturated with near-interchangeable offerings. Its curation-first, human-touch approach to content discovery has not resonated with consumers as a compelling reason to choose Apple Music. Meanwhile, Spotify's meteoric growth shows no signs of slowing. Amidst all of this, Beats 1 Radio has emerged as a bright spot on Apple's otherwise bland service. Lauded by critics, tech-lovers, and artists alike, Beats 1 shows that perhaps the industry ripest for disruption is old-fashioned radio.
In order to understand the streaming industry, one must first understand the realities of music licensing. Unlike the legislative minefield that is video content, where distribution rights must be secured for each country in which a film is to be shown and streaming services compete to obtain the best offerings, music licensing is straightforward. Go to the three major labels, Warner Music Group, Universal Music Group, and Sony Music Entertainment, give them the established 70% cut of revenues, and offer all of the music a customer could want. This makes it easy for streaming services to amass a vast catalogue, but it also leaves them with razor thin margins and no room to compete on price. Could one choose to reduce its catalogue in an effort to improve margins? It would undoubtedly drive consumers away. Thus, the industry has coalesced around a catalogue of 30 million songs and a price point of $10 a month: figures shared by Apple Music, Google Play Music, Spotify, Tidal, and Rdio (Mashable).
Since both price and selection are virtually indistinguishable, streaming services have turned to other avenues to differentiate themselves; they have to compete on the details. Spotify's key feature is an algorithmic approach to music discovery, driven by their $100 million acquisition of machine-learning start-up The Echo Nest. "We're not in the music space, we're in the moment space," Ek claims (The New Yorker), the idea being that people will keep coming back if Spotify can present the music they want to listen to right now. Spotify's biggest advantage, however, is the community that has emerged around it. Playlists are made public by default and are easily shared via a link, making it simple to show friends or circulate online. Spotify understands that music is a social experience and that, as they do for a social network like Twitter, users add value to the service. Apple, meanwhile, hopes that its artist exclusives, like the launch of Drake's "Hotline Bling" music video, will be reason enough to choose it over competitors. Apple has also repeatedly emphasized the importance of human curation in music discovery. With the vast swathe of music available, how does one decide what to listen to? For Apple, music recommendation is too nuanced to be the exclusive purview of machines; choose Apple Music, they say, and our experts will show you the perfect tunes. Thus far, Apple has not delivered on this vision. One reviewer complained that he was recommended an introductory playlist for an artist that he had defined as one of his favourites (CNET). Moreover, the company's promise of community is lacking; the built in social network, Connect, is pointless and rarely used in a world where artists can already communicate with fans over Twitter, Instagram, and Facebook. For a lot of people, Apple Music is a streaming service like any other.
Despite being, in many respects, a Spotify-copycat, Apple Music has produced one unique feature. Met with resounding praise, Beats 1 is a global, ad-free, 24-hour radio service, hosted by all-star DJs, featuring pre-recorded shows curated by indie darlings and international headliners alike. In listening, we defer to the tastes of our favourite artists, whose opinions carry more weight than the unseen Apple employee making Nicki Minaj's Fiercest Rhymes. The value we place on recommendations is inherently higher when they come from those we trust. Fans of classic hip-hop can tune in to Q-Tip's eclectic "Abstract Radio" fans of current hip-hop can catch Drake's "OVO Sound". This curation, however, can go beyond introducing new music: each playlist for art rocker St. Vincent's "Mixtape Delivery Service" is personalized to her handpicked user submission. But why does anyone care? These shows work for the same reason TMZ and E! are successful: they allow listeners to treat with massive stars on equal footing. Alongside this cult of personality, the playlists themselves are a triumph. They call back to a time before the segregation of radio into predictable, genre-based stations, while simultaneously appealing to the way music is consumed in 2015. Vampire Weekend's Ezra Koenig sees his show as a chance to "play music and talk shit" (The Guardian). He plays whatever he likes right now, whether that's 80's pop or UK grime, back-to-back. What could be "uncomfortable" on traditional radio is commonplace on Beats 1. Apple is therefore primed to capture those that have been alienated by today's bland, sterilized radio offerings, and in doing so could be highly profitable. In the US alone, radio advertising is a $17.5 billion industry, dwarfing the $1.6 billion generated in worldwide streaming revenue this year (IFPI). Beats 1 is the free, default radio station on all iOS devices running iOS 8.4 or higher, some 400 million of them. This low barrier to entry in listening, coupled with the service's ad-free nature, will result in rapid growth for Beats 1. Apple's current monetization strategy consists of sponsored audio mentions interspersed throughout their shows; this allows them to position Beats 1 as ad-free while still generating revenue. As adoption figures climb, Apple will be able to command a premium for these mentions, and Beats 1 will emerge as a radio juggernaut.
Apple Music is not going to be the de facto music streaming service. Within several years, Spotify will eclipse the rest of the playing field as Google has with search engines. Their paying user base is more than triple Apple Music's, doubling to 20 million within the past year, and growth shows no sign of slowing. Despite the clout of the company backing it, Apple Music does not provide a cogent argument for its own existence, much less why one would subscribe to it. Nevertheless, Beats 1 Radio, a free feature, has succeeded where Apple's other initiatives have failed, achieving the sort of zeitgeist-like, community feel that keeps users coming back. Abandoning on demand streaming to focus on revolutionizing traditional radio is, thus, Apple's best move.